U.S., Britain tighten financial screws on Iran

The United States and its allies on Monday increased financial pressure on Iran with targeted sanctions on that nation's energy sector and central bank as further punishment for pursuing nuclear weapons technology.

WASHINGTON — The United States and its allies on Monday increased financial pressure on Iran with targeted sanctions on that nation's energy sector and central bank as further punishment for pursuing nuclear weapons technology.

Treasury Secretary Timothy Geithner and Secretary of State Hillary Clinton jointly announced the actions in a late afternoon news conference, just weeks after a tough report critical of Iran's nuclear ambitions from a United Nations watchdog agency and allegations of an Iranian plot to kill Saudi Arabia's ambassador to the United States.

"The message is clear: If Iran's intransigence continues, it will face increased isolation and pressure," Clinton said.

Geithner announced that Iran's entire financial sector is now considered a primary concern for money laundering, and anyone doing business with any element of the Iranian financial sector — either through its central bank or commercial banks — could be considered complicit in its efforts to support terrorism or acquire a nuclear weapon.

"Any and every financial transaction with Iran poses grave risk of supporting those activities," Geithner said.

The Treasury Department published a notice of proposed rulemaking that, after a 60-day comment period, would prohibit any U.S.-based financial firm from having any financial activity with Iranian banks or the Iranian central bank. It also would require greater due diligence measures to protect against indirect transactions with Iran's financial sector.

Expanding on existing sanctions that prevent investment in Iran's energy sector, Clinton said the new sanctions would allow the U.S. government to sanction any individual or company that is providing goods, services or technology to the Iranian petrochemical sector.

Although the two talked tough, the approach announced Monday is actually nuanced. The Obama administration stopped short of a full sanction on the central bank, opting instead to sanction it under a controversial section of the USA Patriot Act.

"The big fight to date is whether to designate the central bank as we did commercial banks," said Patrick Clawson, an Iran expert for the Washington Institute of Near East Peace, a pro-Israel foreign policy think tank.

Section 311 of the Patriot Act was created originally, in the aftermath of the Sept. 11, 2001, terror attacks, as a tool to crack down on financing and money laundering that aids terrorists. Under the Bush administration, it was rarely used for that purpose and instead was used to punish Myanmar for human rights abuses, the tiny Pacific island of Nauru to discourage offshore banking, and Latvian banks for alleged mob ties.

Critics of the provision complain that it lacks basic due process rights, since the accused don't get to see the evidence against them or even the names of their accusers. The Section 311 filing on Iran Monday recounted a long list of allegations but offered scant detail.

Many analysts feared that the fuller designation to isolate the central bank might roil both financial and oil markets. That's because many oil importers clear their transactions by paying Iran's central bank. Iran is the second largest exporter in OPEC, the oil export cartel.

U.S. trading partners such as China, India, South Korea and Japan all buy oil from Iran, and their access to the U.S. financial system could be threatened by fuller sanctions against Iran's central bank.

By deploying the Patriot Act provision, the administration also retains some tools to continue ratcheting up pressure, said Clawson. That's important since it gives room for continued discussion and a measure of leverage.

The tougher U.S. sanctions followed Britain's announcement of similar steps earlier in the day, and they are expected to be followed by similar, perhaps tougher, steps from the European Union on Dec. 1. All the sanctions follow a Nov. 8 report from the International Atomic Energy Agency, which said Iran remains active in its nuclear pursuits.

Iran's critics have not closed the door to future talks.

"We have not given up on engagement," Joao Vale de Alameida, the EU's ambassador to the United States, told a small group of reporters Monday, adding that "we're not at all being complacent."

Iran has been a topic of interest in the GOP presidential debates, with several candidates suggesting that they were open to military intervention to thwart the Persian Gulf nation from obtaining a nuclear weapon. Congress, too, is weighing tougher legislation to target Iran's central bank.

"Iran's continuing defiance of its international legal obligations and refusal to come clean on its nuclear program underscore the need for continued pressure from the international community on its government," Senate Banking Committee Chairman Tim Johnson, D-S.D., said in a statement. "That's why the Banking Committee is developing new bipartisan legislation to impose further U.S. sanctions against Iran."